MORE ECB'S LAGARDE: WE DO NOT SEE THE MATERIAL RISK OF SECOND ROUND EFFECTS AT THE MOMENT

ECB President Christine Lagarde stated that the bank does not currently see a material risk of second-round inflation effects, meaning that price shocks are not yet feeding into wage-setting and broader price expectations. This signal reduces the probability that the ECB must keep policy tighter for longer to contain persistent inflation, which tends to weigh on the euro through narrower expected rate differentials versus other major central banks. The transmission runs primarily through rate expectations: a less hawkish tilt compresses the market's pricing of future ECB hikes, lowering short-end euro yields and reducing the currency's carry appeal. Euro-denominated equities such as the DAX and CAC 40 may find support from lower discount rates and a more accommodative financing backdrop, though export-heavy indices could see partial offset if euro weakness lifts competitiveness concerns less than domestic-rate sensitivity dominates. Traders will watch the next euro-area flash HICP release and the ECB's wage-tracker updates, since any upside surprise in services inflation or negotiated wages would test the credibility of this assessment.

The Euro (EUR) is the currency of 20 European Union member states. Major EUR movers include ECB Governing Council decisions, Eurozone CPI prints, Bund/BTP spread events, and political risk from France, Germany and Italy.

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